DEI policies brought no financial penalty for companies that kept them, study finds
Keeping DEI Programs Cost Companies Nothing, New Research Shows
Bizeconanalysis.com – The question of whether American corporations face a financial penalty for retaining diversity, equity, and inclusion initiatives has long haunted boardrooms since the second Trump administration moved aggressively to dismantle such programs at the federal level and urged private employers to do the same. A new academic paper now answers that question with a clear verdict: there was no measurable market punishment for firms that held their ground.
The study, titled “Markets Do Not Punish Firms for Maintaining DEI,” was co-authored by Jacob Grumbach, an associate professor at the Goldman School of Public Policy at the University of California, Berkeley. The research examined S&P 500 companies and tracked their financial trajectories before and after President Trump signed Executive Order 14173, formally called “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” in January 2025. That executive order directed federal agencies to eliminate DEI offices and signaled a broader political push for private-sector compliance.
Two Paths, One Market
The researchers divided the sample into two cohorts. One group included major retailers and technology firms — Apple, Costco, Delta Air Lines, and Dollar Tree among them — that made no alterations to their existing DEI frameworks despite sustained political pressure. The other group encompassed large companies such as Target and Walmart that scaled back or terminated their diversity programs in response to the administration’s directives.
To compare the two groups, the team measured each firm’s “abnormal performance,” defined as the gap between its expected share return and its actual share return over the relevant period. The result: companies that retained their DEI structures showed no statistically meaningful difference in abnormal returns relative to those that abandoned them. Revenue analysis told the same story. No detectable divergence appeared in sales figures between the two cohorts, suggesting that consumers neither rewarded nor punished firms based on their DEI posture.
“U.S. firms have a lot of leeway” to resist pressure to cut such programs, Grumbach said.
The Risk Calculus Behind Retreat
Even with the absence of a market penalty, Grumbach acknowledged that economic logic could still explain why some executives chose to step back. The uncertainty surrounding how Executive Order 14173 would be enforced created a genuine fear environment in corporate leadership suites.
“A publicly traded firm that’s out of step with an executive order might get less favorable treatment from the executive branch. Or if it’s planning a merger or acquisition, it might not be approved by the Federal Trade Commission, or it could be subject to hostile tax auditing,” he said.
Grumbach characterized that anxiety as rational under the conditions of the moment. The order’s enforcement mechanisms were opaque, and the cost of a single regulatory confrontation could dwarf any reputational benefit from maintaining a DEI program. In a separate scenario he outlined, the executive order itself could shift public sentiment, causally reducing consumer support for diversity initiatives and thereby altering the risk-reward balance for firms that stayed the course.
What Shoppers Actually Did
The revenue data, however, points in a different direction. Many American consumers continued to patronize businesses that maintained practices aimed at uplifting marginalized groups, as evidenced by the stable sales performance of firms in the retention cohort. The broad consumer base did not organize a boycott or redirect spending away from companies simply because they kept their DEI structures intact.
Exceptions exist, and they are instructive. Bud Light’s 2023 partnership with transgender social media personality Dylan Mulvaney triggered a sharp, temporary plunge in shares of its parent company, AB InBev, alongside a notable dip in Bud Light sales in the weeks following the campaign. In 2025, Target faced a different kind of backlash — this time from progressive shoppers — after activists called for a nationwide consumer boycott following the retailer’s decision to end its DEI initiatives. These episodes illustrate that consumer reaction is not uniform and can cut in either direction depending on brand context, timing, and the specific audience mobilized.
Underlying these individual cases, broader sentiment remains favorable toward workplace diversity. A 2025 Gallup and Bentley University poll found that roughly six in ten Americans believe businesses with a diverse workforce are simultaneously more profitable and more innovative.
“There is a business case for diversity, that firms that have DEI should perform better,” Grumbach said. “And there is also a theory that firms would be taking on massive legal and other forms of risk by being out of step with an executive order.”
Interpreting the Null Result
The absence of a financial penalty does not automatically mean consumers are enthusiastic about corporate diversity programs. Grumbach offered an alternative reading: many DEI initiatives are relatively shallow, functioning more as symbolic gestures than as deep operational changes. If the programs themselves carry limited substantive weight, then their presence or absence will naturally produce minimal financial impact in either direction.
“Many things are going on, one of which is that DEI programs don’t always have that much depth to them. Some are symbolic, so this partially reflects that they don’t affect companies as much either way,” Grumbach said.
For corporate strategists, the practical takeaway is layered. The market did not punish retention, which removes one major objection to keeping DEI structures in place. Yet the regulatory and political risk environment created by Executive Order 14173 remains a real variable, and the consumer response, while broadly neutral in aggregate, can spike sharply around specific brand decisions. The study does not tell executives what to do; it tells them that the financial floor is higher than many feared, and that the calculus now rests on brand strategy, regulatory exposure, and the depth of commitment behind whatever programs remain.
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